Complex & ‘simples’

There were 95 speakers and panel participants at the 2018 Australian Energy Week conference that ended on Friday in a wet and windy Melbourne.

They addressed some 360 delegates in plenary and concurrent sessions that scanned the breadth and depth of our transitioning east coast market.

Kicking off proceedings in the chair at the event’s final Energy Policy Forum, I sought to summarize discussion up till then like this: “Most of those attending have wanted to focus on the generation mix for the next decade, the nature of network infrastructure needed to enable this mix, on the vexed problem of consumer costs and, not least, on raising the profile of consumption management in this environment.

“A strong theme in Thursday’s generation mix concurrent session was the vital role of investor confidence in the NEM arrangements now being pursued.

“In this respect, I note that the Australian Energy Regulator has launched its latest newsletter by emphasizing that, notwithstanding the ‘screaming headlines’ in the media, the nuts and bolts work of securing reliable energy at the lowest possible cost goes on every day. My own emphasis would be on the ‘lowest possible cost’ phrase – which is not the same thing as ‘cheap energy,’ the focus of so much public discussion and indeed in focus here this week from manufacturers.

“One cannot listen to the catalogue of investments needed to achieve current market transition plans, let alone more ambitious ones, and not wonder when the community will wake up fully to the point that a substantial part of achieving the desired lower bills will need to come from what users can do for themselves?

“In turn, this raises the issue of energy equity that has been also discussed here.

“Another theme emerging from the conference’s presentations is a concern that getting policy settled is becoming the political goal where the higher issue is making the market really work – with the rider that consumers and investors may not react the way policymakers expect.

“The argument has been put forward here that what investors need is (1) a certain ground, (2) the financial capability to deliver on their plans in an environment where there is a lot of money around but a skittishness about investing here and (3) the benefits of genuine market competition, with one of our CEO speakers adding a fourth “C” – confidence in being able to have economic utilization of infrastructure investment overs its planned life which relates to (2).”

The investment question is not a minor one; modeling commissioned from KPMG by the Australian Energy Council estimates that $23 billion is needed for building NEM generation alone between now and 2030. Conversation with executives during Energy Week suggests the network outlays needed could run to $16-18 billion more. The issue is not a lack of finance availability but bringing it to our market. One executive speaker opined that “there is a wall of money out there – we just have to find a way to attract it.”

By the end of the Energy Policy Forum, I felt I could add to my catalogue a growing view among participants that the CoAG Energy Council is capable of delivering the “national energy guarantee” but also more skittishness about how relatively little it would take at the political level to derail the process.

One of the factors is how political stances feed on community views that, in turn, are influenced by how market players communicate with consumers at large. The Australian Energy Market Commission’s chairman, John Pierce, put his finger on a sore point in the Forum when he described household awareness of the government’s energy-made-easy website as “unacceptably low” and laid the blame on retailers still not doing enough to build public awareness of cost savings and other aspects that could ease user concerns.

New energy entrepreneurs and the incumbent retailers are starting to rise to the challenge, he said, but this is not happening fast enough to alleviate energy bill unhappiness. What the market needs right now, he added, is a disruptor to take the complexity away from retail offers and make bill easier to understand and compare.

The other key factor that he identified as an “oil slick under the wheels of the market” is the failure to date to agree on a mechanism to integrate energy and emissions reduction policies – which brings us round to the “national energy guarantee.”

Pierces argues the NEG is “all about bringing energy policy back to its true focus, the consumer.” It aims, he says, to meet abatement commitments without putting a further cost burden on households and the economy. It is critical, he says, to stay the course on this reform to create a mechanism that can adjust to whatever change the future may bring “at the lowest possible cost.”

That phrase again. What it actually means is costs lower than they will otherwise be if we continue to stumble and bumble through the “transition.” But a change this complex cannot possibly be “cheap.” This will be the more so if the body politic continues to pick technology winners rather than allow investors to use a neutral market to compete for advantage. Which is why going all out to guide consumers, and especially households, towards the best ways to meet their needs is so important. A point that, as the damned meerkat’s catchphrase in the TV adverts has it, should be perceived as “simples” by suppliers.

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